Atlantic Coast Exposition Explores Advocacy, Vending And Micromarkets

Posted On: 11/14/2017

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MYRTLE BEACH, SC -- An array of educational opportunities awaited participants in the 2017 Atlantic Coast Exposition in Myrtle Beach, SC. New this year was an early-bird  session led by Nicole Greer, the "vibrant coach." dedicated to optimizing team performance. Separate registration was required for this event, which dealt with leadership as the key to optimizing workforce performance.

A second separate-registration seminar, this one devoted to the art of coffee, was held on Friday morning. The four-hour in-depth workship was sponsored by Newco Enterprises and led by Mike Tompkins of Coffee Products Associates (Chicago), the long-time presenter of the National Automatic Merchandising Association's coffee brewing certification program.

The formal ACE program kicked off with a legislative update by National Automatic Merchandising Association regional legislative director Sheree Edwards, who was introduced by Kevin Caid of Crane Merchandising Systems, brought the audience up to date on topics of concern to operators, and reported that the NAMA Fly-In legislative advocacy program continued its dramatic growth this year.

The NAMA Fly-In encourages industry members to convene in Washington to visit the offices of their elected officials. It has grown in three years; 40 states were represented this year. Participants spoke with legislators and their staff members, expressing support for tax and regulatory reform.

Edwards explained that topics of current concern include proposals to reconsider rules that restrict the sale of food and beverage items at federal interstate highway rest stops to products sold through vending machines operated in accordance with the Randolph-Sheppard Act. Opening the rest stops to commercial competition would deal a heavy blow to blind vendors.

She added that other matters currently attracting attention in Washington include  discussion of requiring the Food & Drug Administration to implement rules for labeling food products made with genetically modified organisms and the Environment Protection Agency's ongoing effort to mandate changes in the refrigerant gases used in vending machines.

The NAMA government affairs expert observed that the "gridlock" in Washington has impelled the promoters of anti-business causes to turn their attention to local jurisdictions. Especially noteworthy have been municipal initiatives to reduce consumption of sweetened beverages through punitive taxes or labeling requirements.

Edwards reported that NAMA has two new video presentations available: NAMA's Nutrition Story (to be shown to influencers) and Fit Pick 101, for operators who need information on vendible products that can meet demands for "healthier" selections.

In a question-and-answer period that followed her presentation, Edwards was asked what operators can do to support the Fly-In advocacy effort if they are unable to travel to Washington. "You can visit your legislators' home offices," she replied. "Introduce yourselves and explain that you're in the vending business."

The legislative update was followed by a panel discussion of contemporary vending technology. The session was introduced by Patrick Shaw, Canteen of Asheville (NC); panelists were Stephanie Kull of Vendors Exchange International; Maeve Duska, USA Technologies; Bob Hurley, Cantaloupe Systems; and David Marler, LightSpeed Automation.

Kull noted that today's consumers increasingly respond to "shopper marketing" - using their smartphones to find a nearby Starbucks, for example - and when they find it, Starbucks markets to them by means of the phone. This requires an "ecosystem," and it's not difficult to imagine one built around the vending bank, or the micromarket, in a location. People in the site could use their phones to interrogate the installation to find out whether products they want are available. Several wireless systems are capable of supporting this kind of service, including the wireless wide-area network used for telemetry and shorter-range systems compatible with smart mobile devices not working through the Internet. The popular Bluetooth wireless "personal area network," orignally developed by mobile phone pioneer Ericsson to replace the cables connecting cellphones to accessories like headsets, has been evolving into a versatile system with which consumers are familiar. A recent development is the "Bluetooth beacon" for retailers, which may find application in the workplace refreshment industry.

Once the consumer is at the machine, Kull continued, a video screen can continue the engagement during the transaction and after it. A good deal of work has been done in this area, and new possibilities continue to arise. "What's important is that you understand your customers and what they want," she summed up.

Duska brought ACE seminar-goers up to date on USA Technologies' popular ePort system for vending machines and other self-service retail equipment. The complete ePort implementation includes cashless payments, the transmission of DEX transaction data and provision for accessing the relevant information. At ACE show time, she reported, 560,000 vending machines were connected through the ePort network, and 300,000 locations were equipped to accommodate cashless transactions made with near field communications - a payment medium that has soared in popularity since Apple added NFC capability to its iPhone 6 three years ago, and Google followed suit with Android devices.

USAT, a pioneer in cashless vending since the turn of the millennium, maintains a "knowledge base" chronicling the acceptance of cashless micropayments by unattended points of sale for nearly two decades. Duska reported that the figures continue to show cashless sales increasing, and also demonstrate that vending machines equipped to accept cashless payments enjoy higher cash sales as well. "People prize convenience," she said.

Since cashless payments first gained a foothold in vending, the conventional wisdom has been that machines in high-traffic locations are the most favorable candidates for updating. Duska reported that the USAT knowledge base shows lower-performing machines actually benefiting more from cashless acceptance. "Just because a machine isn't a top performer doesn't mean it can't become one," she emphasized. "The return on investment is there."

Today's consumers want self-service, she reiterated; "they want convenience, ease and speed. They don't want to talk to you, but they want to feel special. This is the reason for loyalty programs." ePort can accommodate these, including mobile programs that don't involve a physical card. "This works," the industry veteran said. "People spend more money.

"The future of retail is unattended," the USAT executive summed up. "So you're ahead of the game, and you can stay ahead if you add the tecnology you need to keep up with consumer preferences."

Cantaloupe's Bob Hurley reported that his company, which developed the widely used Seed system and management software for telemetry and cashless payments, gauges its success by the success of its customers. "The business is evolving," he said. "The old model was cash only, static routes and 'rolling warehouses.' Today, the model is cash and cashless acceptance, dynamic routes and trucks that come back empty at the end of the day. The data you receive tells you what your patrons want, and telemetry tells you when service is needed."

Cantaloupe has been augmenting its "Seed cloud" services, which now include Seed Cashless, Seed Pro (route planning software that identifies the products to be carried by each truck) and Seed Office, a vending-management and data-analysis software suite.

"Old VMS suites don't depict the effect of out-of-stock/out-of-service conditions, so users tend to over-service their accounts and they need excess capacity on their trucks. When you get data in real time, you get access to a lot of information that you want," Hurley said. The ability to pack route orders in advance, by machine - pre-kit - is only one of the efficiency-boosting benefits.

With the traditional static schedule, Hurley pointed out, the driver may visit a machine once a week. "But if that machine goes down, you don't know about it until the next visit." With "smart scheduling," a technician can be sent to make the repair right away, and the driver can fill and collect when the machine requires it.

"I was an operator in south Florida," Hurley recalled. "I started small, but we partnered with Cantaloupe to help us grow." One key here was adopting "depletion levels" rather than "sold-outs" to determine when to schedule a stop. "And we used planograms to minimize our stales." Among the numerous advantages of managing each machine according to its particular needs is that one driver can service more machines and sell more products every day.

"And it's a myth that the customer wants to see the same driver on the same schedule all the time," he concluded. "You can accommodate all sorts of locations with a dynamic routing system - and scheduling on the basis of real-time information is more accurate than forecasting."

LightSpeed's David Marler, who wrapped up the session, observed that embracing telemetry to boost operational efficiency is not the whole story. "You can't ignore the warehouse," he emphasized. "This is your biggest cost area."

Good warehouse organization follows the same principles as good food preparation layout in a central kitchen, Marler explained. He showed a brief video depicting an exercise that McDonald's conducts with its new store managers, in which they gather on a tennis court and use chalk lines to depict the stages of pulling, assembling, preparing, wrapping and serving an order: where the storage, counter areas and equipment are located, and how the people performing the necessary tasks move around and interact. That activity gives the restaurant manager a hands-on sense of what everyone does, and a better understanding of how each task can be done most efficiently, with the fewest wasted steps.

Marler advocates the "production pick index," or PPI, as an important measurement of warehouse efficiency. It assigns points to each step in the process of making up a route order, and when analyzed, can be used to optimize the layout of the pick line to permit picking by planogram. This analysis will show the merits of storing the top sellers at the top, not cutting boxes on the line, recognizing that conveyors with tote bins are faster than carts, and determining the situations in which straight-line shelving is more efficient than a U -shaped layout. Combined with experience, this analysis also can show that efficient handling of cardboard - perhaps purchasing a baler that allows one to sell the packaging materials for recycling - can speed matters up considerably.

Proper warehouse mapping is important, the speaker continued. "If you pick by zone, watch how you pick within each zone," he advised. "Assign different rows to items picked in different volumes."

Experience has shown that, with three people available, it can be more efficient to assign two of them as pickers while the third handles the waste cardboard and replenishes the shelves when needed (this person might be called a "stacker").

In addition to making changes needed to minimize wasted steps, the warehouse staff can receive incentives based on reducing the cost of each item picked. "Post the pick results so they're visible to everyone. People like to compete."

The concluding seminar dealt with micromarkets. It was moderated by Scott Halloran, Trolley House Refreshment Services (Richmond, VA). His panelists were Michael Coffey, Canteen (Charlotte, NC); Erich Markee, AB Vending (Boston, MA); Josh Rosenberg, Accent Foods (Austin, TX); and John Hickey, Tech2Success (New York City).

Halloran led off by taking an informal poll of the audience, revealing that most of them are running micromarkets. He asked the panel for brief descriptions of their experience.

"We've got the basics down," Markee replied. "'Clean, filled and working.' The question is, where do we go from here?"

Canteen's Coffey agreed. "For one thing, how do we bring them into breakrooms?" he wondered. "What payment systems are most satisfactory? What new technology is available? The next step is getting the data we need to encourage customers to come back more often."

"Five years in, I think our clients value the micromarkets we provide," Markee observed. "They tend to see vending as a revenue stream, while they view micromarkets as a service."

Accent's Rosenberg reported that his company has more than 800 micromarkets out. "We do a lot of data collection." The challenge, he suggested, is to encourage greater use: "we're not getting more participation than we get with vending. In both, about a third of the account population becomes a core of good, steady customers.

"We doubled participation by adding fresh food," Rosenberg continued. "We can get our prices." A market-basket analysis may show that someone who goes out for lunch has to spend an average of $11; "if we can do it for $9, and tell our patrons about it, they'll see the value."

He also recommends working closely with suppliers to host sampling sessions - and doing the same with the central kitchen. He has found that this kind of promotion does increase participation.

"And embrace mobile payment; get your 'market card' into their pockets," Rosenberg added. "The people who use your mobile app are your best customers."  Hickey agreed. "Get your app out there," he urged; "push products through it."
In his view, the big challenge posed by micromarkets is that "they may be unattended, but they need constant attention."

Halloran, a micromarket pioneer in his southeastern market area, agreed. "We have to determine the best way to do that; and how to refresh and renew them," he said.

Markee noted that food needs careful management, however it's sold. "Watch your stales," he urged. "And look at your transaction data. Do you have a lot of traffic in the morning? Then add more breakfast items to your menu."

"Yes," Canteen's Coffey concurred. "It's easy to talk about 'big data,' but you have to know how to use it for category management. You need to offer a mix of products from the right categories, and identify the best SKUs in each. Stick to seeking out information that you can execute on.

"And rethink," he continued. "Could you restock on a Sunday-through-Thursday schedule rather than Monday through Friday? Most of your traffic probably isn't at lunchtime."

Rosenberg observed that micromarkets are more "fluid" than vending machines. "We encourage our suppliers to step up as 'category captains,' but they have to do it right; they can't concentrate on their own lines."

He recommended a "five in, five out" policy, in which the operator identifies the five slowest-moving items in each category for each service cycle, and replaces them with five new selections when the next cycle starts. "And put the new ones in a highly visible position, like near the payment terminal," he advised.

"How else can we use data more effectively?" Halloran asked.

"If you only have five or six markets, you need to make a decision," Hickey replied. "If you decide to buy more, you'll get to the point where you can hire someone to analyze your data." He noted that there is a tendency to sneer at the use of Microsoft Excel for data analysis, but that contempt is misplaced and generally is exhibited by people who don't know how to make full use of the popular spreadsheet program. "When you understand it, Excel can be a powerful analytical tool," he said.

Halloran asked about dealing with the challenges that micromarket operators confront with growth, and with staffing.

Markee observed that, when an operator expands to about 50 micromarkets on location, it becomes very important to retain a loss-prevention person. "And, perhaps, an analyst and a marketer as well; but be careful to maintain control," he warned.

"We're in 'retail' now," Coffey added; "and vending often doesn't help to develop a retail skill-set. Vending route drivers, supervisors and managers usually aren't retailers. You have to look at your people."

"Right," Rosenberg said. "We put our best vending drivers on our micromarket routes, and it didn't work; the skills aren't transferrable."

A good vending route driver knows how to go into a location, fill and collect, clean, close up and go, he pointed out; "but a good micromarket driver has to look around and adjust the product display too.

"And, if you expand into food, pay close attention to the health and standards, including those that cover truck and personnel," Rosenberg emphasized.

Teaching & Learning

"We've made a lot of mistakes in hiring," Hickey reported. "The biggest have been recruiting top performers from existing successful businesses - the people we needed were ones who could build that kind of organization themselves.

"And, regarding your drivers: vending route drivers may not work out on  micromarket routes - but do try training them before you send them out to do something they've never done before," he continued. "If you don't, you'll instill fear in your long-term service personnel: will you just replace them? Train first; communicate," he urged.

"And you might not want to advertise for 'drivers' when recruiting for a micromarket route," he continued. "You don't need an applicant who wants to drive a truck all day long." When recruiting, he added, it's important to focus on developing a company culture, and on hiring people with compatible personalities.

Coffey pointed out that operators compete for talent. "It's not hard to find jobs paying $15 an hour today," he said. "Add technology; look for a retail mindset."

Halloran asked the panelists for their predictions on what they will be doing differently in three to five years. "What will change?" he wondered.

Markee anticipates the adaptation of the micromarket concept to a wider range of location sizes. He is interested in pursuing smaller accounts, and suggested that the minimum size of a profitable micromarket stop will continue to shrink as operational techniques improve. "We'll try to go down as far as we can," he said.

"We want to leverage our data, to become more data-driven," Coffey explained. "This is the first year in which 'vending' did not outsell our 'other markets.' We're changing, and trying to simplify."

Rosenberg predicted that "there will be no kiosks in three years; the smartphone will be the kiosk. We benefit from technology; we can compete with anyone - and remember: Amazon is coming.

"And watch vending equipment development," he advised. "New closed-front machine types can compete with micromarkets while protecting the products, so they can go into public sites."

Hickey noted that micromarket operators have not yet had to deal with severe economic downturns. "What happens when a large micromarket account lays off 700 people? Vending has faced this - and micromarkets will, too."

In a question-and-answer session following the panel discussion, an audience member asked the panelists what they've seen of operators losing micromarket accounts to competitors.

"It's new, but it's a service business," Coffey replied. "We've won locations from other micromarket operators."

"What frightens me is new micromarket operators coming in who don't recognize the need for contracts, who don't understand pricing, and who offer commissions," Rosenberg said. Markee noted that his company has won business by offering more attractive micromarket treatments - "millwork rather than plain old wire racking."